Determine the price rate-demand , Basic Statistics

SkyyMarley Airlines has determined that the price elasticity of demand for two customer segments (Coach and Business Class) is -1.35 and -2.50.  Based on their expectations of profitability, SkyyMarley realizes the price of a Coach seat should be $175 (one way).  How much should SkyyMarley charge for a Business Class ticket?  (

The relation between elasticity, P and MC when profits are maximized is

MC= P(1-1/e) where is the absolute value of elasticity of demand.

For a coach seat

MC= 175( 1-1/1.35 )= 45.37

Assuming MC is same for business class

P= MC/ (1-1/e) = 45.37 /(1-1/2.5) = 75.616-it can charge this price for business class


Posted Date: 3/6/2013 4:40:14 AM | Location : United States

Related Discussions:- Determine the price rate-demand , Assignment Help, Ask Question on Determine the price rate-demand , Get Answer, Expert's Help, Determine the price rate-demand Discussions

Write discussion on Determine the price rate-demand
Your posts are moderated
Related Questions
does interest realized come under debit or credit side of trial balance pleases i need answer

A.Austria invested cash $1,000 and a type writer $2,500

Card custodian statement A zero poise due declaration: listing all transactions throughout the billing period: that is sent to the buy card custodian by the purchase card supplier

EXERCISE 3-12 Computing Predetermined Overhead Rates and Job Costs [LO1,LO2, LO3, LO7] Kody Corporation uses a job-order costing system with a plantwide overhead rate based on ma

how to figure out cost of good available for sale, cost of sales, ending inventory

accounting equation.

Question: (a) 100 individuals applied for systems analyst positions with a large firm during the past year. 40 of them had some prior work experience (W), and 30 had a profes

What are the applications of measure of dispersion in civil engineering?

select and list five items used to sample the domain in childhood obesity

What is an irrevocable letter of credit? A permanent mail of credit score is a financial instrument used by banks to guarantee a customer's obligations to a supplier. It is perm